May 3, 2011. Today is the deadline for housing associations to submit their ‘offers’ to the Homes and Communities Agency about what homes they might build over the next four years. Islington Council in London has thought long and hard about its strategy for delivering affordable homes. In an exclusive article for Red Brick, Councillor James Murray, Executive Member for Housing at Islington, sets out the borough’s plan.

Today marks the latest stage (and by no means the final one) in attempts by housing associations and others to steer a course through the government’s new ‘Affordable Rent’ programme. This programme’s headline has been known for a while: that housing associations would be allowed to charge up to 80 per cent of market rent on new build homes and a percentage of their relets. But teasing out the practicalities and implications of how this works in practice is taking a lot more discussion.

And in London, the acute implications of rent levels being set at 80 per cent of market – particularly in the inner-London boroughs and particularly for family-sized properties – have inspired months of discussion between London boroughs, the Homes and Communities Agency, and housing associations operating in the capital.

As part of this discussion, many London boroughs have set out their initial positions on ‘Affordable Rent’. In Islington, our position has focused on how we can respond to the concerns we have about the difficulty of using ‘Affordable Rent’ to address housing needs in our very high value borough.

We believe a different model is more appropriate for Islington. We are asking housing associations to work with us and use grant from the local authority – in the form of public land at discounted rates and capital from our new homes bonus – rather than grant from the government’s main ‘Affordable Rent’ programme. In return for this, we ask that housing associations build homes at social rents.

We believe that this is the best way to tackle our housing crisis in Islington. Like many London boroughs we have thousands of overcrowded families, and several hundred who are severely overcrowded (lacking two or more bedrooms). It is clear that tackling this means prioritising more family homes for social rent.

Since the election in May, 2010, we have prioritised a new council home building programme that means we will be on-site for over 100 new homes this year. Alongside our council-owned stock, we want to continue to work with our housing association partners.

In Islington we have a strong relationship with a number of housing associations. Through historical links, stock transfers, and new build projects, housing associations have played and continue to play a vital and positive role in Islington’s affordable housing stock.

We want this relationship to continue, and we believe that our plan for social rent with local authority grant will be the best way to enable willing housing associations to continue to build the kind of homes we need.

It goes without saying that the 80 per cent of market rent ‘Affordable Rent’ properties would be completely unaffordable in Islington. Our social rents are currently between 30 – 35 per cent of market rent, and so this would represent more than a doubling of the current levels.

Allowing properties to be developed at 80 per cent market rent would mean the new tenants either face an enormous rent hike or a deep benefits trap. Those not on benefits may decline to move into a new flat in future – even if doing so would relieve overcrowding or reduce under occupation – because of the unattractiveness of higher rents for new build properties. And for those on benefits, the looming prospect of caps makes the outlook uncertain and grim.

Some have suggested allowing 80 per cent market rent on, say, one-bed properties, and offering a rent level less than 80 per cent on the larger family dwellings. This may work in some places, but we do not believe it works in Islington. Our planning policy is explicit that we need the family homes rather than new one-bedroom flats. Our current council-owned stock is over 40 per cent one-bed properties – we are in fact piloting a separate programme of selling certain one-beds through shared ownership and using the capital raised to build new family homes.

So our priority in Islington has to be family homes at genuinely affordable rents. With our well-known high property prices in Islington, we believe that social rents, offering close to a level playing field with council rents, are the right level for this.

That is why we have said we will support schemes from housing associations that offer homes at social rent, and that are subsidised where necessary through our grant in the form of public land or capital. We have a pipeline of sites identified from public land – enough land for over 500 homes immediately, with several hundred more being looked at for the future. And our decision to dedicate almost all the borough’s new homes bonus to new home building means this year we can offer £1 million capital grant.

We have been pleased by the positive reaction from a number of housing associations to our plans. We are currently in negotiation with one of our housing associations on the details for a new scheme that would be the first under the new regime to offer social rent with land subsidy from the borough.

Our model will not be appropriate for allLondonboroughs – just as the ‘Affordable Rent’ model is not appropriate for Islington. But although it is self-evident that our position is outside the government’s main programme, we are committed to working with willing housing associations to make this work for them and for those in our borough with the most acute housing need.

Very interesting, thank you. It would be good to know whether Islington expects to meet its total unit targets through this approach – not that total units is a particularly good yardstick, but it’s the one that inevitably becomes the focus of media and political attention.